What is hyperinflation?

We have all heard older generations complain about the price of products "nowadays", talking about how $1 used to buy them a movie ticket and popcorn, compared to the average cost of $10 for just a ticket today. They aren't complaining about nothing, this is a very real issue the world is currently facing and it's known as inflation.

Although, with the way the economy has been going lately, hyperinflation may feel like a more fitting term. In basic terms, hyperinflation is referring to a very high and accelerating inflation rate. Let's cover what inflation is, and how this differs from hyperinflation.

What is inflation?

Inflation refers to a decrease in purchasing power related to a specific currency. This means a progressive increase in the price of goods and services results in a certain amount of money being able to buy less over time.

As already stated above, what $1 used to buy back in the day is merely a fraction of what the product or service now costs. Usually, inflation occurs at a gradual rate, however, there have been instances where inflation rates have accelerated at much faster speeds. This rapid acceleration rate leads to the value of a country's currency being diminished at an alarming rate. This is then referred to as hyperinflation.

Hyperinflation is measured when the inflation rate increases by 50% or more in one month.

What causes hyperinflation?

You may be wondering how hyperinflation occurs, and that's a great question. From an economic standpoint, there are two main causes, although external factors can also come into play. External factors might include war, natural disasters, a pandemic, and more, however, here we will be covering the two main causes.

Number one is an increased money supply. Most think that an excess supply of money sounds great, but it can have colossal impacts on a currency if not backed by economic growth. Countries usually grow through trading, businesses, and bringing money into the country from outside the borders.

This issue comes into play when countries print money at an accelerated rate, increasing government debt with central banks which they then have to pay back with interest. This additional interest and debt gets placed on citizens, who are then expected to pay more tax and pay more for products. 

The second is demand-pull inflation. This can also be described as supply vs demand. While some small businesses see this as a benefit, being able to increase prices due to their unique products, the same can not be said for common household items. This inflation occurs when the demand for products goes up, especially as capitalism rises, yet the production of said products can not contend. 

This creates a gap within the supply, making it hard for businesses and economies to make money unless they raise their prices. So again, we see product prices rising thus reducing the purchasing power of a currency. 

The effects of hyperinflation 

One of the most common effects of hyperinflation is the devaluation of currencies, moving those who hold them to switch to more valuable assets. Whether it is investing in the stock market or another currency, this takes additional money out of the currencies' economy and proceeds to make hyperinflation worse. Luckily those who have invested in other means of value are not as affected by this additional pressure.

Previously, inflation in Zimbabwe reached such dire levels that the country ultimately wrote off its national currency and switched over to the US dollar. At one point, their currency was so hyperinflated that their $100 trillion Zimbabwe dollar banknote could only buy a few loaves of bread. This impact affected banks, foreign trading, and basic government services, creating another ripple effect leading to further inflation. It's a problem that continues to occur, ravaging countries and livelihoods around the world.

Hyperinflation and monetary policies

Central banks play a vital role in preventing hyperinflation through the implementation of monetary policies.. As they control the money supply, regulate interest rates, and oversee the stability of the currency, central banks are responsible for maintaining a balance between growth and inflation. Done so by carefully monitoring economic indicators to manage and prevent potential risks of excessive growth and inflation.

In order to keep hyperinflation at bay, governments need to practise responsible fiscal policies, avoiding excessive borrowing and uncontrolled spending. Maintaining a stable exchange rate and encouraging foreign investments can also strengthen economic stability.

How to combat hyperinflation

In an attempt to curb the devastating effects of hyperinflation, below are four measures that governments and central banks could implement.

Tightening money supply

An obvious one, central banks can reduce hyperinflation risks by curbing the rapid increase in the money supply. This involves limiting the printing of new money and implementing stringent monetary policies.

Interest rate adjustments

By raising interest rates, central banks can discourage excessive borrowing and spending, which acts as a means of stabilising the currency's value and mitigating hyperinflationary pressures.

Currency controls

Implementing currency controls can be a smart move to stop money from leaving the country and prevent risky speculation, all while keeping the currency strong during uncertain economic times.

Currency reforms

In extreme cases, currency reforms, such as introducing a new, more stable currency or adopting a foreign currency as legal tender, can be considered to tackle hyperinflation and restore economic confidence, as was the case with Zimbabwe mentioned above.

Examples of hyperinflation in history

These instances from the past where hyperinflation wreaked havoc serve as a clear indication of the devastating economic impact it can have on countries.

Germany (Weimar Republic):

During the early 1920s, Germany experienced one of the most infamous hyperinflation episodes. Printing money to cover war reparations led to the German Mark's catastrophic devaluation, resulting in absurd price increases and widespread economic collapse.

Zimbabwe:

Mentioned above, in the late 2000s, Zimbabwe endured a severe hyperinflationary crisis, reaching unimaginable levels. Rampant money printing and political instability eroded the Zimbabwean dollar's value, rendering it practically worthless and forcing the country to abandon its currency.

Venezuela:

Starting in the 2010s, Venezuela suffered a hyperinflationary spiral driven by a combination of political mismanagement, plummeting oil prices, and economic turmoil. This ongoing crisis has caused immense hardships for the Venezuelan population.

Yugoslavia:

In the 1990s, Yugoslavia grappled with hyperinflation as a result of political fragmentation and war. Spiralling prices led to the eventual replacement of the Yugoslav dinar with new currencies in several successor states.

Hungary:

Post-World War II, Hungary faced hyperinflation of unprecedented proportions. Skyrocketing prices and economic instability plagued the country until it eventually switched to a new currency.

These history lessons serve as cautionary tales, showing us just how terrible hyperinflation can be and why it's crucial to have solid monetary policies in place to protect against these economic disasters.

In conclusion

Hyperinflation, rapidly increasing inflation rates, is a serious economic problem with disastrous effects, as seen in historical examples like Germany, Zimbabwe, Venezuela, Yugoslavia, and Hungary. While central banks play a crucial role in preventing hyperinflation through monetary policies, governments must too play their part and practice responsible fiscal policies.

While inflation rates might feel dire, hyperinflation is highly unlikely to ever take effect in the United Kingdom as The Bank of England and government have many tools at their disposal to identify and prevent the onset.

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While the crypto industry continues to grow at a breathtaking pace, one problem continues to run wild. That problem is the fact that blockchains are not interoperable, meaning that they can only exist in their individual nature. Polkadot set out to change this, creating a network that aims to connect multiple blockchains in one simple solution. As a direct competitor to Ethereum, the blockchain network has a different structural approach.

What Is Polkadot (DOT)?

Polkadot is a blockchain network created by one of the Ethereum founders. Through the use of intricate architecture, the platform aims to connect multiple networks through their relay chain and parachain system (more on this below). 

Similar to Ethereum, developers can create their own decentralized apps (dapps) and smart contracts on the network. Referred to as a sharding multichain network, Polkadot aims to provide a platform on which developers can build multiple blockchain networks off a common standard. Traders can then trade a range of products built on the network, similar to how ERC-20 tokens are traded.

Who Created Polkadot?

Founded in 2016, Polkadot was created by one of the Ethereum co-founders, Gavin Wood, alongside Peter Czaban and Robert Habermeier. Woods notably created the Ethereum language Solidity, which allows developers to create dapps on the Ethereum network. 

Wood is also the founder of Parity Technologies and the president of Web3 Foundation. Web3 Foundation is a Swiss foundation that was designed to facilitate a user-friendly, open-source decentralized web. The company's approach to crypto is one of its kind and sets it above any other competitor.

How Does Polkadot Work?

As mentioned above, Polkadot utilizes a relay chain and parachain system. Each parachain is a blockchain in itself, however, they all rely on the relay chain to facilitate transactions. These blockchains work in a "parallel" manner (hence the name) and can each hold their own tokens and individual use cases. The relay chain provides blockchain support to the parachains on the network.

Finalizing the transactions and being responsible for maintaining network security, the relay chain is able to facilitate 1,000 transactions per second (TPS). Utilizing a hybrid consensus mechanism, the enterprise network has created proof-of-stake (PoS) and a nominated-proof-of-stake (NPoS) model. 

Through this variation, anyone can stake DOT in a particular smart contract and perform network roles such as being a :

• Validators (validate data in parachain blocks, vote on network changes)
• Nominators (select validators by delegating their staked DOT to them)
• Collators (nodes with full histories of each parachain, that transfer this information into blocks for the relay chain)
• Fishermen (responsible for monitoring the network and reporting bad behaviour to the validators)

These four roles allow Polkadot to have a highly sophisticated user-driven governance system as each role contributes to maintaining and securing the network while eradicating bad behaviour. 

The network is working on a third blockchain functionality known as a bridge. Bridges will allow blockchains on the Polkadot network to interact with "outside" blockchains, essentially allowing tokens to be swapped directly without needing to go through an exchange. 

Through this intensive structuring, Polkadot aims to solve two problems that the blockchain network is currently plagued with scalability and governance. 

What Is DOT?

DOT is the native cryptocurrency to the Polkadot network and is used as a governance and utility token, allowing users to vote on proposed upgrades and used for gas fees. It plays an integral role in maintaining and operating the network. As a digital currency, it can also be used to execute cross-border transactions.

The platform was launched in 2020 and has already established itself in the top 10 biggest cryptocurrencies. 

Does Polkadot Have A Max Supply Cap?

To answer the question "what is the total supply of Polkadot" the answer is that there isn't one. The network opted to leave the total number of DOT infinite. At the time of writing the circulating supply was just short of 1 billion coins.

What Is The Difference Between Polkadot And Ethereum?

A common question in the crypto community, not just because they share similar use cases but also because the two networks share a founder. Both networks provide a platform on which developers can create their own blockchains, and following the launch of Ethereum 2.0., will both be using a PoS consensus. 

Structurally the Polkadot platform differs in that it makes use of parachains and a relay chain. This is a unique feat in the blockchain industry. Through this structure, the network aims to improve on several of Ethereum's functionalities and deliver a trifactor of governance, scalability and interoperability to the blockchain industry, without compromising security. 

How Can I Buy Polkadot?

If you're looking to incorporate Polkadot (DOT) in your cryptocurrency portfolio, look no further than Tap Global. A recent addition to the exchange's portfolio, users can buy, sell, trade and store DOT directly through the professional app. Whether looking to trade DOT for its technology and smart contract capabilities, or to tap into a new market, Tap allows traders to diversify their cryptocurrency portfolio in one secure location.

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Know your customer also known as "KYC" is a regulatory requirement imposed by the Financial Crimes Enforcement Network to combat money laundering, terrorism financing, and fraud prevention. The requirements for KYC are determined on an industry-by-industry basis. Fintech businesses and the Bank sector typically requires KYC of customers who open a new account with them.

KYC ensures that financial institutions know their customers' identity well enough to understand where funds came from for deposits or how payments will be made before starting to use the company's services. KYC is an efficient first line of defense in combating terrorism financing by verifying customer identities to help identify any potential links to terrorist organizations, bribery, corruption, individuals with a history of money laundering.

KYC is an important measure in anti-money laundering regulations, making it a safety guard for cryptocurrencies. Financial institutions and regulated service providers such as Tap boast robust KYC process to protect our consumers so that you can feel more confident that your funds will remain secure no matter the business environment circumstances.

How does KYC work?

Within the Finance sector, any company or project must meet strict rules and regulations that require to have rigorous identification checks (also called regulatory compliance) such as verification of address information, validation of residency status. Apart from verifying a customer's identity, it's also important to confirm the user's location and address. Your identity documents will provide basic data like your name and date of birth, but more is needed to establish your residence, for example.

During a standard Know Your Customer process, you will be asked for several documents:

-A proof of identity ( such as passport, ID card, driving license)

-A proof of residence

-A selfie (to prove that it's you)

The KYC must be completed at the initial stage as well as on an ongoing basis so that businesses can deliver services or goods to clients. It is a best practice for any business offering financial services to re-verify the identity of their customers at regular intervals to ensure AML. Sometimes new customers have to go through several steps of verification before they can start any financial transaction/investment using the service of the company.

KYC Around The World:

KYC regulations can vary from country to country, but there is a lot of international cooperation on the basic data information needed. For example in America, KYC and AML processes are driven by financial crime prevention legislations such as The Bank Secrecy Act (2001) and Patriot Act (2006). In Europe, KYC compliance regulation falls under EU Anti-Money Laundering Directive with PSD2 providing additional regulatory guidance for all countries within the Union. Internationally however it's been agreed that FATF should coordinate multinational cooperation when it comes to regulatory conditions.

The Benefits: 

In spite of the time it takes to set up accounts, KYC identity verification is worth it when taking into account the benefits, keeping your funds safe, protect you from identity theft, fraud, and other illegal activities is largely the result of robust KYC control. These procedures ensure that financial service providers are not only safe but trustworthy. Trade Crypto with Confidence with regulated companies like Tap boasting robust KYC procedures to safeguard its customer assets and information.

In short: KYC is a common regulatory requirement that financial service providers are obliged to fulfill in order for businesses to operate under the law and consumers should take KYC seriously. KYC requirements differ across the financial sector. It is a necessary measure in anti-money laundering regulations, making it an important safety guard for cryptocurrencies as well as customer assets by preventing fraudulent activity. KYC in the Fintech or Bank sector is generally imposed on new customers who open a new account.

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Overexposure is a common pitfall in trading, which occurs when a trader invests too heavily in a single asset, exposing themselves to a significant amount of risk. If the asset does not perform as expected, the trader's entire portfolio can suffer significant losses.
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To mitigate the risks of overexposure, traders can employ a strategy known as diversification. This involves investing in a range of assets across various industries and sectors, spreading out the risk and increasing the likelihood of positive returns. By diversifying their portfolio, traders can reduce the impact of a single asset's poor performance, as losses in one area can be offset by gains in others.
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Avoiding overexposure is an essential aspect of risk management, as it helps traders balance potential gains against potential losses. While it may be tempting to invest heavily in a single asset that appears to be performing well, this strategy can be risky, as even the most successful assets can experience significant losses due to unforeseen events or changes in the market.
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In addition to diversification, there are several other strategies traders can use to avoid overexposure. These include setting stop-loss orders, which automatically sell an asset if its price falls below a specified threshold, and regularly reviewing and adjusting investment strategies based on market conditions and performance.
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It is also important for traders to conduct thorough research before investing in any asset to ensure they fully understand the potential risks and rewards. By being informed and educated, traders can make more informed decisions about their investments and minimize the risks of overexposure.
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In conclusion, overexposure is a common risk in trading that can have significant consequences for a trader's portfolio. Diversification is an effective way to mitigate the risks of overexposure, and traders can also use other strategies such as setting stop-loss orders and regularly reviewing their investments.

Risk in trading is the chance that something might negatively impact an investment. Before engaging in any trading activities it is important to evaluate your appetite for risk, determining whether you are able to handle more risk or are more risk averse. 

Measuring risk will be dependent on the type of asset you are investing in, the amount of capital you have to use, and the time frames in which you expect to see results. Different assets and trading strategies hold different amounts of risk. 

For example, investing in an index fund is considered a low-risk investment and is better advised to investors looking to make a slow and steady return over a longer period of time. Index funds aggregate the performance of the 100 companies listed on a particular stock exchange and pay back dividends accordingly. Because they are large companies the growth is often more likely to be smaller yet consistent. 

With a little more appetite for risk, in the crypto markets, the same could be said about choosing to invest in an emerging altcoin versus established cryptocurrencies like Bitcoin or Ethereum. An emerging asset would encompass a higher risk higher reward ratio, however, no returns are guaranteed. 

You can speak to a financial advisor to get a sense of your risk appetite.

Litecoin is part of the first generation of altcoins to emerge after Bitcoin ignited the crypto revolution. This peer-to-peer cryptocurrency is a popular option when it comes to transacting in the real world and investors' portfolios, and has been a permanent feature in the top 15 biggest cryptocurrencies by market cap for years. 

What Is Litecoin?

Litecoin was launched in 2011 as an alternative to Bitcoin, providing users with a faster means of transacting money over the internet. While it was never designed to replace Bitcoin, Litecoin was created to complement the original digital money. Litecoin is often referred to as "digital silver" compared to Bitcoin being referred to as "digital gold".

Litecoin is widely considered to be one of the most successful altcoins. Created as a hard fork off of Bitcoin's blockchain, Litecoin holds many similarities in the way it functions, however, the team behind the open-source cryptocurrency incorporated several features to ensure that the network operated in a faster manner.

These include changing the amount of time it takes to process transactions, the maximum total supply, the hashing algorithm, and charging very low transaction fees. Compared to Bitcoin's 21 million total supply and 10-minute transaction processing time, Litecoin has a maximum supply of 84 million LTC and can process transactions in 2.5 minutes. It also opted to use a Scrypt hashing algorithm over the SHA-256 one.

The network is known for pioneering advanced crypto features like the Lightning Network and Segregated Witness, both of which have since been implemented by the Bitcoin network. 

How Does Litecoin Work?

As Litecoin is based on Bitcoin's software, they function in very similar ways. Through the Proof-of-Work consensus, all transactions are executed through mining. When a transaction enters the mempool (pool of pending transactions) it is soon picked up by a miner who will then ensure that all the details are accurate (including valid wallet addresses and available balances).

The first miner to solve a cryptographic puzzle is awarded the task of executing the transactions and in turn, earns a reward. At the time of writing the reward was 12.5 LTC, however, after every 840,000 blocks mined the reward halves in what is known as a halving reward. This mechanism is in place to manage the supply of new tokens entering circulation as each block mined releases minted new tokens.

As mentioned above, transactions are executed in 2.5 minutes, provided there is no congestion on the network, making it attractive to merchants and other service providers. The cost of making a transaction on the Litecoin network ranges from $0.03 or $.04 US cents.

Litecoin vs blockchain technology

Litecoin, like many other cryptocurrencies, is built on blockchain technology. It relies on the blockchain as the underlying technology to facilitate secure and decentralized transactions.

Litecoin transactions are facilitated by the blockchain through a decentralized ledger. When a transaction occurs, it is grouped with other transactions into a block. Miners then validate the transactions and add the block to the Litecoin blockchain. This process ensures the transparency and integrity of Litecoin transactions.

Blockchain plays a crucial role in securing Litecoin transactions by providing a decentralized and immutable record of all transactional activity. Each block is linked to the previous block, forming a chain, making it extremely difficult for malicious actors to alter past transactions. The distributed nature of the blockchain network ensures that no single entity has control over Litecoin transactions, enhancing security and trust in the system.

What gives Litecoin its value?

The value of Litecoin is determined by supply and demand, often determined by trade activity on exchanges. Due to its global liquidity and finite supply, Litecoin is a deflationary currency and has witnessed price gains over the years, making it an attractive option for investors in the global financial landscape over the years. 

What is Litecoin used for?

Litecoin is a peer-to-peer payment system providing both a medium of exchange and a store of value. Due to its fast transaction times and secure network, Litecoin is often favored when making transactions that are time-sensitive, i.e. paying for a coffee or at a restaurant. LTC is widely used by merchants and service providers around the world and has experienced increased crypto adoption and investment over the last decade.  

Who created Litecoin?

The Litecoin project is the creation of a former Google engineer and MIT graduate named Charlie Lee. Two years after creating Litecoin, Lee would go on to become the Director of Engineering at a large cryptocurrency exchange. In 2017, Lee rejoined the team as managing director of the Litecoin Foundation, a non-profit organization dedicated to the development of the blockchain platform and its technology.

Litecoin development and community

Litecoin's development process involves a dedicated team of developers who work on improving the Litecoin software and its functionalities. It follows a transparent and open-source approach, allowing anyone to contribute to its development and propose changes.

The Litecoin software undergoes regular updates and enhancements to ensure it remains secure, efficient, and compatible with emerging technologies. These updates often introduce new features, improve performance, and address any identified vulnerabilities.

Litecoin has a vibrant and active community that actively participates in its evolution. Community members provide feedback, report bugs, and contribute to discussions on Litecoin's future development. Their contributions range from code contributions from developers to community-driven initiatives, fostering a collaborative environment and shaping the direction of Litecoin's growth.

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